2018 German EMS industry shows best revenue growth rate in ten years

The German electronics manufacturing services (EMS) industry achieved its best revenue growth for the past ten years with an increase of 7.4% (prev. year +3.4%) and calculated in USD 12.2%. This number has been achieved by the participants in the in4ma annual survey, representing 103 EMS companies, which accounts for more than 63% of the total German revenues for this industry. Every second company had a two-digit growth rate.

German revenues grew more than double the percentage of the export revenues. For 2019, the participants of the annual survey anticipate a growth of 6.2%.

Employment grew by 4.2%; the reporting companies hired 840 additional employees. It therefore can be assumed, that the whole German EMS industry created about 1,400 new jobs in 2018.

Order intake grew 22% (prev. year 11%) more than revenues representing a B2B factor of 1.22. This further increased the order backlog and leads to a theoretical range of coverage of 209 working days. This development is primarily due to allocation problems with some components, which caused 10% of companies to suffer a decline in revenues against the previous year. Customers are now prompted to release orders with a longer planning horizon. In total 19% of all EMS companies had a lower revenue than in 2017.

While in former years the export rate was at 30%, by now a distinct decline is to be observed – especially at larger companies. The average export rate in 2018 stood at 19.7% (Prev. year 20.4%).

In Austria, revenue growth was subdued with 2.6% in 2018 according to 11 reporting companies, which represent about 50% of Austrian EMS revenues. The EMS industry in Austria already had achieved a record revenue in 2017 with plus 9.6%.

But optimism is unbroken as the industry hired 5.6% more employees. Order intake exceeded revenues by 15% (13%). The export ratio increased slightly. For 2019, the industry is forecasting a further revenue growth of 4.9%.

After a longer hard time, Switzerland surprised with a growth of 10.5% (in Swiss Franc), reported by EMS companies, which represent about 39% of the Swiss EMS revenues. Due to currency shifts this equals to 6.4% (0.9%) calculated in Euro (and 11.7% in USD).

Employment grew by 11.2% (-3.6%). %). Bookings were lower than revenues (B2B 0.90) which caused a reduction in order backlog. The forecast for 2019 is cautious with plus 3.3%.

Total revenues of all EMS companies in Germany, Austria and Switzerland are estimated to reach close to 9 billion Euro (2017 8.38 billion Euro) in 2018, which equals to about 10.6 billion USD. First results published by European public listed EMS companies indicate a similar growth rate, which, if their growth rate is assumed valid in general, would allow a total volume of about 38.6 billion Euro (45.6 billion USD) for the whole European industry in 2018.

It is too early to take this for granted, as global EMS companies like Foxconn, Flex and Jabil, which generate about 30.5% of the European EMS revenues are unpredictable in their revenue development in Europe. Their customers are multinational OEMs, which manufacture in Europe only because of customs and tax reasons and because of proximity to their customers. Unexpected wage increases, (as was the case with an 18% wage hike at Audi in Hungary in January 2019) can easily change production strategies of these global EMS companies.

The annual EMS survey together with research in the country company registers forms the basis for the European EMS statistics. It is deemed to be the most reliable source for market data by many EMS companies, as in4ma works in the bottom up strategy, analyzing 1,788 EMS companies in Europa individually.

(Numbers in brackets for 2017)

Source: in4ma EMS statistics, www.in4ma.de